Against the tide: There’s more crunch to come

We are in a bear market for risk assets. Numerous hits to the financial sector are still to come that will keep global liquidity shrinking and asset prices under pressure.

Central bank actions have been successful in normalizing inter-bank rates and Federal Reserve chairman Ben Bernanke will make more interest rate cuts. Also, the US administration has introduced a large fiscal policy boost. But the credit crunch is not over and it will continue to weaken the real economy and the balance sheets of the financial sector.